Two regimes in B.C. provide different routes to cover common law and employment standards requirements
Employment standards legislation in all jurisdictions provides minimum standards and limitations for employers regarding how they treat their employees in various aspects of the job. HR professionals and employers must keep these standards in mind as they run their businesses. In British Columbia, employers have another layer of administration to deal with — the Employment Standards Branch.
The Employment Standards Branch has its own administrative procedures on enforcing the province’s employment standards legislation. The result is the B.C. has two different streams of enforcement, depending on whether the issue at hand deals directly with legislative rights or common law rights.
The rights and duties of employees and employers arise both at common law and under statute — in British Columbia, the statutory requirements around such issues as wages and severance are set out in the province’s Employment Standards Act (ESA).
Employees in B.C. may enforce many of their rights in their contract of employment through the court system; however, because of the B.C. Court of Appeal decision in Macaraeg v. E Care Contract Centers, they must use the administrative procedures set up by the Employment Standards Branch (ESB) to enforce any legal rights that arise directly from the ESA. While both regimes deal with a number of similar employment law issues, the courts and the ESB have developed certain nuanced differences in approach, particularly in the area of termination. For this reason, human resources professionals and legal counsel alike should be familiar with the differences between the two forums.
There are four ways in which the common law and employment standards legislation differ with respect to employee dismissal in BC, namely:
• Mitigation and severance pay
• Constructive dismissal and condonation
• Calculating severance pay
• Notice of termination.
Mitigation and payment of severance pay
It is a well-established common law principle that where there is no severance-limiting clause in his employment contract, a dismissed employee is entitled to reasonable notice of termination (or pay in lieu thereof). During the notice period, the employee must mitigate her losses, and any wages she earns through new employment during that time can be deducted from any damages she receives in a successful wrongful dismissal claim. This creates a circumstance whereby an employee who is fired and immediately starts work at a new job with the same pay may suffer no damages for loss of salary by the end of the notice period. Even though her employer breached the employment contract, the employee has no provable damages from the breach.
By comparison, no such mitigation principle applies under the ESA. As soon as it dismisses an employee, an employer becomes liable to pay her the minimum severance amount set out in s. 63 of the ESA (unless one of the legislated exceptions in s. 65 applies). Furthermore, this statutory amount must be paid within 48 hours following dismissal. For this reason, an employer should always pay a dismissed employee the appropriate statutory minimum at the time of termination, even in cases where severance negotiations are ongoing.
Constructive dismissal and condonation
At common law, if an employee continues in her position after her employer has made a unilateral, fundamental change to her employment (amounting to constructive dismissal), she may be deemed to have accepted, or condoned, the changes. This means that after a period of time, she will be precluded from suing for constructive dismissal on the basis that her conduct was a tacit agreement to the employer’s alterations — or rather, she can sue, but the employer may succeed in its defence by claiming condonation.
Section 66 of the ESA essentially codifies the common law principle of constructive dismissal, and dictates that if a condition of employment is substantially altered, the Director of Employment Standards may determine the employee’s employment to be terminated. The manner in which these ESB claims are assessed is similar to how a court determines whether a constructive dismissal has occurred. However, the key difference under the employment standards regime is that there is no condonation argument available to an employer. Under s. 66, the termination of employment occurs as soon as the employer alters the employment terms, such that it cannot escape its severance obligations simply because the employee continues to work following the statutory constructive dismissal: see Isle Three Holdings Ltd. and British Columbia (Director of Employment Standards), Re. This approach is consistent with the ESB’s position that employee mitigation does not affect an employer’s obligation to pay statutory severance pay.
As such, employers should keep in mind that an employee who waits too long to bring a civil claim for constructive dismissal may still have recourse against the employer through the ESA.
Calculation of severance pay
Common law damages for wrongful dismissal are meant to compensate an employee for her lost earnings throughout the notice period. This means the court’s damages assessment may need to incorporate seasonal work stoppages or slowdowns, or anticipate the payment of bonuses or other incentives. The common law also entitles the dismissed employee to compensation for the loss of opportunity to earn commissions, such that a damages award will include commissions he would likely have received during the notice period. In assessing this amount, courts will examine a variety of factors, including the employee’s past commission earnings over a representative period, the employer’s actual or anticipated sales revenues, and whether the business conditions during the relevant period were responsible for unusually high or low commission earnings.
Section 63 of the ESA, on the other hand, contains a specific formula for the calculation of severance pay, known as “compensation for length of service.” The employer must add up the regular wages the employee earned in the last eight weeks she worked normal or average hours, and divide that number by eight to arrive at the calculation of one week’s wages. In completing its calculations, the employer must exclude any weeks which are not representative of the employee’s typical hours of work. The result is that an employee who works on a commission or piecework basis could see her entitlement fluctuate depending on his sales or work volume in the eight weeks before termination. Another difference from the common law is that the ESA excludes overtime from the calculation of severance pay. By comparison, an employee may be able to make a claim for lost overtime in court if she worked overtime so consistently that it had become a regular part of the compensation package.
These differences can create a situation where the calculation used by the employer to pay the employee her statutory severance amount is significantly different from the calculation used in the parties’ forward-looking separation negotiations or by the courts. Therefore, employers and employees both should be mindful of these differences and consider whether the departing employee is being under- or over-compensated through the final negotiated severance amount.
Notice of termination
At common-law, an employer is not required to give an employee written notice of termination. While it is advisable to provide written notice since this will create clarity around the date of notice and the terms of dismissal, there is no obligation to do so.
By contrast, the ESA requires that notice of termination be delivered in writing. Even if notice is clearly delivered verbally, an employee can still claim minimum termination pay through the ESB if she failed to receive notice in writing. This can create a scenario of an employee receiving common-law reasonable notice entitlements, but still being able to file a complaint with the Employment Standards Branch to obtain further separation payments.
Take-away for employers and employees
Although this article is specific to British Columbia, it highlights the need to consider how a provincial employment standards regime may differ from general common law principles. Employers and employees should both keep in mind the above differences where an actual or constructive dismissal has occurred, and when negotiating and calculating appropriate separation packages.
For more information see:
• Macaraeg v. E Care Contract Centers Ltd., 2008 CarswellBC 855 (B.C. C.A.).
• Isle Three Holdings Ltd. and British Columbia (Director of Employment Standards), Re, 2008 CarswellBC 3712 (B.C. Empl. Stnds. Trib.).
